The trade deficit has been larger than May’s pot of red ink, but not by much.
The Commerce Department
announced today that total May imports exceeded exports by $63.8 billion. That amounts to $500 million deeper in the red from April’s trade tally. On the other hand, May’s deficit is below the all-time monthly low of $66.6 billion of last October.
Most of the trade deficit can be traced to the state of business in goods, such as industrial supplies, consumer goods, agricultural products and automobiles, as the chart below illustrates. The dollar-value of exports of these and other items in the aggregate have in fact been growing over time. For the 12 months through May, for instance, U.S. exports of goods rose by 12.9%. Impressive as that is, it falls short of the 13.4% increase in goods imports into America over those 12 months.
It’s a different story with services, a catch-all label that includes an array of items that the government labels business, professional and technical services, for instance. Whatever you call it, exports of services expanded by 9.8% for the 12 months through May, comfortably above the 8.8% rise in services imports.
But while the U.S. does a booming business in selling services overseas, it’s a relatively small part of the trade ledger, or so the Commerce Department tells us. The business of importing and exporting goods is several times larger, measured by dollar value, and so the U.S. posts a trade deficit.
These trends have prevailed for years, and so America continues to report a deficit in trade that, over time, continues to descend. Today’s trade report isn’t likely to change this secular trend. If anything, questions about what the ongoing trade deficit means for the U.S. economy will only loom larger after perusing today’s numbers.
Chief among the queries: What lies ahead for the dollar if the trade deficit continues to deepen? Billions of dollars hang in the balance, not to mention the U.S. economy and its financial system, depending on the answer.